Letter

Rural hospitals need to be aware

In August, the Department of Health and Human Services, Office of the Inspector General recommended legislative changes that would permit reassessment, and possible decertification, of Critical Access Hospitals (CAH) that are currently exempt from CAH “location requirements.”

Location requirements stipulate that a CAH be at least 35 miles from another hospital (less in mountainous areas) and meet the program’s definition of a rural location. Exemption to the location requirement was granted to hospitals deemed “necessary providers” by their states.

The CAH program is intended to assure the solvency of small, rural hospitals — so that rural populations may have access to health care. This is accomplished by reimbursing CAHs for Medicare services at 101 percent of costs, which is much more generous than payments to non-CAH hospitals. In 2011 Medicare paid $8.5 billion to 1,300-plus CAHs, 64 percent of which do not meet the location requirements of the CAH program.

Given escalating Medicare costs, there is a powerful incentive to reassess the legitimacy of a hospital’s CAH status. Using 2011 data, the OIG calculated that if the Centers for Medicare and Medicaid Services (CMS) decertified CAHs positioned 15 or fewer miles from another hospital, Medicare would save $449 million. If the 35-mile criterion is applied, much greater savings are possible. The imminent challenge to CAH status, coupled with reduction in Medicare and Medicaid reimbursements, has alarming financial implications for hospitals and communities.

For years, CAH decertification has been the Damoclean Sword hanging over CAH hospitals that have been exempted from CMS location requirements.

Critical Access Hospitals that have acknowledged this long-understood threat, and managed their finances conservatively, should be able to weather reduction in Medicare payments if decertified. Those Critical Access Hospitals that have ignored potential decertification, and banked on continued CAH status, will face significant financial challenges and may not survive.